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Sony Group Corp 6-K, filed Feb 4, 2020

Sony Group Corp (SONY)

6-K 2020-02-04 For: 2020-02-04
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Added on July 04, 2026

About this 6-K

Sony Group Corp filed this 6-K on February 4, 2020.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of February 2020

Commission File Number: 001-06439

SONY CORPORATION

(Translation of registrant's name into English)

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN

(Address of principal executive offices)

The registrant files annual reports under cover of Form 20-F.

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,

Form 20-F  X Form 40-F __

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-______

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SONY CORPORATION
(Registrant)
By:  /s/  Hiroki Totoki
(Signature)
Hiroki Totoki
Senior Executive Vice President and
Chief Financial Officer

Date: February 4, 2020

List of materials

Documents attached hereto:

i) Press release: _______________________________________________________

Quarterly Financial Statements

for the Third Quarter Ended December 31, 2019

And

Outlook for the Fiscal Year Ending March 31, 2020

February 4, 2020

Sony Corporation

Quarterly Financial Statements (Unaudited) F-1
Consolidated Balance Sheets F-1
Consolidated Statements of Income (Three months ended December 31) F-2
Consolidated Statements of Comprehensive Income (Three months ended December 31) F-2
Consolidated Statements of Income (Nine months ended December 31) F-3
Consolidated Statements of Comprehensive Income (Nine months ended December 31) F-3
Consolidated Statements of Cash Flows (Nine months ended December 31) F-4
Notes to Consolidated Financial Statements F-5
-      Business Segment Information F-5
-      Going Concern Assumption F-12
-      Significant Changes in Shareholders’ Equity F-12
-      Accounting Policies and Other Information F-12
Outlook for the Fiscal Year Ending March 31, 2020 1
Outlook for the Fiscal Year Ending March 31, 2020 1
Cautionary Statement 4

All amounts are presented on the basis of Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”).

Sony Corporation and its consolidated subsidiaries are together referred to as “Sony”.

(Unaudited)

Consolidated Financial Statements

Consolidated Balance Sheets

(Millions of yen)
March 31 December 31 Change from
ASSETS 2019 2019 March 31, 2019
Current assets:
Cash and cash equivalents ¥ 1,470,073 ¥ 1,408,876 ¥ -61,197
Marketable securities 1,324,538 1,567,158 +242,620
Notes and accounts receivable, trade and contract assets 1,091,242 1,345,472 +254,230
Allowance for doubtful accounts (25,440 ) (24,609 ) +831
Inventories 653,278 607,377 -45,901
Other receivables 223,620 183,359 -40,261
Prepaid expenses and other current assets 509,301 531,784 +22,483
Total current assets 5,246,612 5,619,417 +372,805
Film costs 409,005 487,449 +78,444
Investments and advances:
Affiliated companies 163,365 214,935 +51,570
Securities investments and other 11,561,286 12,264,017 +702,731
11,724,651 12,478,952 +754,301
Property, plant and equipment:
Land 83,992 82,565 -1,427
Buildings 664,157 655,293 -8,864
Machinery and equipment 1,585,382 1,675,580 +90,198
Construction in progress 39,208 53,601 +14,393
2,372,739 2,467,039 +94,300
Less-Accumulated depreciation 1,595,686 1,612,108 +16,422
777,053 854,931 +77,878
Other assets:
Operating lease right-of-use assets — 306,568 +306,568
Finance lease right-of-use assets — 36,221 +36,221
Intangibles, net 917,966 923,180 +5,214
Goodwill 768,552 792,673 +24,121
Deferred insurance acquisition costs 595,265 618,792 +23,527
Deferred income taxes 202,486 194,187 -8,299
Other 339,996 325,176 -14,820
2,824,265 3,196,797 +372,532
Total assets ¥ 20,981,586 ¥ 22,637,546 ¥ +1,655,960
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings ¥ 618,618 ¥ 896,819 ¥ +278,201
Current portion of long-term debt 172,461 32,647 -139,814
Current portion of long-term operating lease liabilities — 67,186 +67,186
Notes and accounts payable, trade 492,124 464,265 -27,859
Accounts payable, other and accrued expenses 1,693,048 1,671,762 -21,286
Accrued income and other taxes 135,226 182,505 +47,279
Deposits from customers in the banking business 2,302,314 2,432,044 +129,730
Other 666,024 656,193 -9,831
Total current liabilities 6,079,815 6,403,421 +323,606
Long-term debt 568,372 631,705 +63,333
Long-term operating lease liabilities — 265,606 +265,606
Accrued pension and severance costs 384,232 301,698 -82,534
Deferred income taxes 531,421 545,623 +14,202
Future insurance policy benefits and other 5,642,671 6,007,246 +364,575
Policyholders’ account in the life insurance business 3,048,202 3,323,874 +275,672
Other 281,382 263,098 -18,284
Total liabilities 16,536,095 17,742,271 +1,206,176
Redeemable noncontrolling interest 8,801 8,689 -112
Equity:
Sony Corporation’s stockholders’ equity:
Common stock 874,291 878,401 +4,110
Additional paid-in capital 1,266,874 1,287,895 +21,021
Retained earnings 2,320,586 2,858,054 +537,468
Accumulated other comprehensive income (610,670 ) (531,857 ) +78,813
Treasury stock, at cost (104,704 ) (260,889 ) -156,185
3,746,377 4,231,604 +485,227
Noncontrolling interests 690,313 654,982 -35,331
Total equity 4,436,690 4,886,586 +449,896
Total liabilities and equity ¥ 20,981,586 ¥ 22,637,546 ¥ +1,655,960

F-1

Consolidated Statements of Income

(Millions of yen, except per share amounts)
Three months ended December 31
2018 2019 Change
Sales and operating revenue:
Net sales ¥ 2,220,123 ¥ 2,034,826 ¥ -185,297
Financial services revenue 161,630 405,382 +243,752
Other operating revenue 20,052 22,954 +2,902
2,401,805 2,463,162 +61,357
Costs and expenses:
Cost of sales 1,581,376 1,411,228 -170,148
Selling, general and administrative 430,025 400,032 -29,993
Financial services expenses 123,756 372,540 +248,784
Other operating income, net (112,809 ) (18,056 ) +94,753
2,022,348 2,165,744 +143,396
Equity in net income (loss) of affiliated companies (2,469 ) 2,714 +5,183
Operating income 376,988 300,132 -76,856
Other income:
Interest and dividends 6,436 3,900 -2,536
Gain on equity securities, net — 13,392 +13,392
Foreign exchange gain, net 5,085 — -5,085
Other 1,927 1,286 -641
13,448 18,578 +5,130
Other expenses:
Interest expenses 3,510 1,129 -2,381
Loss on equity securities, net 44,777 — -44,777
Foreign exchange loss, net — 427 +427
Loss on pension plan amendment — 6,358 +6,358
Other 1,619 475 -1,144
49,906 8,389 -41,517
Income before income taxes 340,530 310,321 -30,209
Income taxes (100,723 ) 69,977 +170,700
Net income 441,253 240,344 -200,909
Less - Net income attributable to noncontrolling interests 12,291 10,806 -1,485
Net income attributable to Sony Corporation’s
stockholders ¥ 428,962 ¥ 229,538 ¥ -199,424
Per share data:
Net income attributable to Sony Corporation’s
stockholders
— Basic ¥ 337.97 ¥ 187.02 ¥ -150.95
— Diluted 330.77 182.89 -147.88

Consolidated Statements of Comprehensive Income

(Millions of yen)
Three months ended December 31
2018 2019 Change
Net income ¥ 441,253 ¥ 240,344 ¥ -200,909
Other comprehensive income, net of tax –
Unrealized gains (losses) on securities 24,986 (25,168 ) -50,154
Unrealized gains on derivative instruments 326 368 +42
Pension liability adjustment 2,342 80,122 +77,780
Foreign currency translation adjustments (36,160 ) 46,249 +82,409
Total comprehensive income 432,747 341,915 -90,832
Less - Comprehensive income attributable
to noncontrolling interests 20,634 2,538 -18,096
Comprehensive income attributable
to Sony Corporation’s stockholders ¥ 412,113 ¥ 339,377 ¥ -72,736

F-2

Consolidated Statements of Income

(Millions of yen, except per share amounts)
Nine months ended December 31
2018 2019 Change
Sales and operating revenue:
Net sales ¥ 5,632,057 ¥ 5,318,782 ¥ -313,275
Financial services revenue 846,363 1,115,291 +268,928
Other operating revenue 59,769 77,072 +17,303
6,538,189 6,511,145 -27,044
Costs and expenses:
Cost of sales 3,916,607 3,629,246 -287,361
Selling, general and administrative 1,176,915 1,105,115 -71,800
Financial services expenses 728,246 997,211 +268,965
Other operating income, net (99,751 ) (24,017 ) +75,734
5,722,017 5,707,555 -14,462
Equity in net income (loss) of affiliated companies (4,667 ) 6,422 +11,089
Operating income 811,505 810,012 -1,493
Other income:
Interest and dividends 15,741 14,658 -1,083
Gain on equity securities, net 79,937 372 -79,565
Foreign exchange gain, net 1,174 — -1,174
Other 4,121 4,441 +320
100,973 19,471 -81,502
Other expenses:
Interest expenses 10,704 8,793 -1,911
Foreign exchange loss, net — 9,376 +9,376
Loss on pension plan amendment — 6,358 +6,358
Other 2,760 1,523 -1,237
13,464 26,050 +12,586
Income before income taxes 899,014 803,433 -95,581
Income taxes 33,767 196,916 +163,149
Net income 865,247 606,517 -258,730
Less - Net income attributable to noncontrolling interests 36,837 36,970 +133
Net income attributable to Sony Corporation’s
stockholders ¥ 828,410 ¥ 569,547 ¥ -258,863
Per share data:
Net income attributable to Sony Corporation’s
stockholders
— Basic ¥ 653.09 ¥ 460.11 ¥ -192.98
— Diluted 638.89 450.08 -188.81

Consolidated Statements of Comprehensive Income

(Millions of yen)
Nine months ended December 31
2018 2019 Change
Net income ¥ 865,247 ¥ 606,517 ¥ -258,730
Other comprehensive income, net of tax –
Unrealized gains on securities 3,920 14,757 +10,837
Unrealized gains on derivative instruments 1,241 60 -1,181
Pension liability adjustment 7,085 86,162 +79,077
Foreign currency translation adjustments 4,305 (17,501 ) -21,806
Total comprehensive income 881,798 689,995 -191,803
Less - Comprehensive income attributable
to noncontrolling interests 33,865 41,635 +7,770
Comprehensive income attributable
to Sony Corporation’s stockholders ¥ 847,933 ¥ 648,360 ¥ -199,573

F-3

Consolidated Statements of Cash Flows

(Millions of yen)
Nine months ended December 31
2018 2019
Cash flows from operating activities:
Net income ¥ 865,247 ¥ 606,517
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization, including amortization of
deferred insurance acquisition costs and contract costs 278,405 281,393
Amortization of film costs 232,138 212,684
Accrual for pension and severance costs, less payments (5,601 ) 4,714
Other operating income, net (99,751 ) (24,017 )
Gain on securities investments, net (other than financial services business) (80,130 ) (392 )
(Gain) loss on marketable securities and Securities investments held in the financial
services business, net 43,780 (127,002 )
Deferred income taxes (150,648 ) 23,594
Equity in net (income) loss of affiliated companies, net of dividends 7,628 (2,737 )
Changes in assets and liabilities:
Increase in notes, accounts receivable, trade and contract assets (290,046 ) (237,477 )
Decrease in inventories 7,252 34,865
Increase in film costs (296,276 ) (296,377 )
Increase (decrease) in notes and accounts payable, trade 124,026 (12,640 )
Increase in accrued income and other taxes 67,644 34,419
Increase in future insurance policy benefits and other 290,626 554,596
Increase in deferred insurance acquisition costs (68,092 ) (73,385 )
Increase in marketable securities held in the life insurance business (68,579 ) (103,746 )
Increase in other current assets (25,948 ) (15,047 )
Increase (decrease) in other current liabilities 167,892 (16,443 )
Other (98,203 ) (9,452 )
Net cash provided by operating activities 901,364 834,067
Cash flows from investing activities:
Payments for purchases of fixed assets (230,008 ) (314,791 )
Proceeds from sales of fixed assets 13,463 12,445
Payments for investments and advances by financial services business (808,017 ) (970,438 )
Payments for investments and advances
(other than financial services business) (40,930 ) (40,423 )
Proceeds from sales or return of investments and collections of advances
by financial services business 216,013 208,164
Proceeds from sales or return of investments and collections of advances
(other than financial services business) 2,705 13,169
Payment for EMI Music Publishing acquisition, net of cash acquired (244,197 ) —
Proceeds from sales of businesses — 13,404
Proceeds related to sales of Spotify Technology S.A. Shares 82,467 —
Proceeds from sales of Olympus Corporation Shares — 80,357
Other (26,497 ) (27,969 )
Net cash used in investing activities (1,035,001 ) (1,026,082 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt 70,958 110,535
Payments of long-term debt (378,047 ) (189,790 )
Increase in short-term borrowings, net 180,467 278,028
Increase in deposits from customers in the financial services business, net 205,990 211,135
Dividends paid (38,081 ) (49,621 )
Payments for purchase of treasury stock (141 ) (156,187 )
Payment for purchase of noncontrolling interest in Nile Acquisition LLC (32,041 ) —
Payment for purchase of noncontrolling interest in Game Show Network, LLC — (39,894 )
Other (33,279 ) (19,110 )
Net cash provided by (used in) financing activities (24,174 ) 145,096
Effect of exchange rate changes on cash and cash equivalents, including restricted 49,499 (14,887 )
Net decrease in cash and cash equivalents, including restricted (108,312 ) (61,806 )
Cash and cash equivalents, including restricted, at beginning of the fiscal year 1,592,938 1,473,813
Cash and cash equivalents, including restricted, at end of the period 1,484,626 1,412,007
Less - restricted cash and cash equivalents, included in other current assets and
other assets 3,810 3,131
Cash and cash equivalents at end of the period ¥ 1,480,816 ¥ 1,408,876

F-4

Notes to Consolidated Financial Statements

Business Segment Information

(Business Segments)

(Millions of yen)
Three months ended December 31
Sales and operating revenue 2018 2019 Change
Game & Network Services
Customers ¥ 759,109 ¥ 616,576 ¥ -142,533
Intersegment 31,504 15,554 -15,950
Total 790,613 632,130 -158,483
Music
Customers 205,287 213,861 +8,574
Intersegment 4,063 3,077 -986
Total 209,350 216,938 +7,588
Pictures
Customers 276,340 235,702 -40,638
Intersegment 397 312 -85
Total 276,737 236,014 -40,723
Electronics Products & Solutions
Customers 709,319 645,818 -63,501
Intersegment 3,797 4,611 +814
Total 713,116 650,429 -62,687
Imaging & Sensing Solutions
Customers 201,469 277,816 +76,347
Intersegment 28,858 20,191 -8,667
Total 230,327 298,007 +67,680
Financial Services
Customers 161,630 405,382 +243,752
Intersegment 1,956 1,846 -110
Total 163,586 407,228 +243,642
All Other
Customers 86,466 63,129 -23,337
Intersegment 14,885 9,144 -5,741
Total 101,351 72,273 -29,078
Corporate and elimination (83,275 ) (49,857 ) +33,418
Consolidated total ¥ 2,401,805 ¥ 2,463,162 ¥ +61,357

Game & Network Services (“G&NS”) intersegment amounts primarily consist of transactions with All Other.

Imaging & Sensing Solutions (“I&SS”) intersegment amounts primarily consist of transactions with the G&NS segment and the Electronics Products & Solutions (“EP&S”) segment.

All Other intersegment amounts primarily consist of transactions with the G&NS segment, the Music segment and the Pictures segment.

Corporate and elimination includes certain brand and patent royalty income.

(Millions of yen)
Three months ended December 31
Operating income (loss) 2018 2019 Change
Game & Network Services ¥ 73,082 ¥ 53,450 ¥ -19,632
Music 147,096 36,250 -110,846
Pictures 11,588 5,422 -6,166
Electronics Products & Solutions 66,213 80,336 +14,123
Imaging & Sensing Solutions 46,510 75,182 +28,672
Financial Services 37,894 32,634 -5,260
All Other 6,104 20,673 +14,569
Total 388,487 303,947 -84,540
Corporate and elimination (11,499 ) (3,815 ) +7,684
Consolidated total ¥ 376,988 ¥ 300,132 ¥ -76,856

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

The 2018 sales and operating revenue and operating income (loss) above has been reclassified to reflect the change in the business segment classification discussed on page F-13.

F-5

(Business Segments)

(Millions of yen)
Nine months ended December 31
Sales and operating revenue 2018 2019 Change
Game & Network Services
Customers ¥ 1,744,843 ¥ 1,496,372 ¥ -248,471
Intersegment 67,936 47,609 -20,327
Total 1,812,779 1,543,981 -268,798
Music
Customers 583,289 630,641 +47,352
Intersegment 11,388 7,825 -3,563
Total 594,677 638,466 +43,789
Pictures
Customers 691,588 681,848 -9,740
Intersegment 1,101 858 -243
Total 692,689 682,706 -9,983
Electronics Products & Solutions
Customers 1,825,118 1,612,785 -212,333
Intersegment 12,119 15,058 +2,939
Total 1,837,237 1,627,843 -209,394
Imaging & Sensing Solutions
Customers 601,066 774,570 +173,504
Intersegment 85,946 64,839 -21,107
Total 687,012 839,409 +152,397
Financial Services
Customers 846,363 1,115,291 +268,928
Intersegment 5,881 6,053 +172
Total 852,244 1,121,344 +269,100
All Other
Customers 238,139 181,704 -56,435
Intersegment 35,254 29,057 -6,197
Total 273,393 210,761 -62,632
Corporate and elimination (211,842 ) (153,365 ) +58,477
Consolidated total ¥ 6,538,189 ¥ 6,511,145 ¥ -27,044

G&NS intersegment amounts primarily consist of transactions with All Other.

I&SS intersegment amounts primarily consist of transactions with the G&NS segment and the EP&S segment.

All Other intersegment amounts primarily consist of transactions with the G&NS segment, the Music segment and the Pictures segment.

Corporate and elimination includes certain brand and patent royalty income.

(Millions of yen)
Nine months ended December 31
Operating income (loss) 2018 2019 Change
Game & Network Services ¥ 247,154 ¥ 192,241 ¥ -54,913
Music 210,701 112,007 -98,694
Pictures 27,522 45,116 +17,594
Electronics Products & Solutions 115,379 146,789 +31,410
Imaging & Sensing Solutions 123,575 201,088 +77,513
Financial Services 117,635 117,518 -117
All Other 11,440 20,505 +9,065
Total 853,406 835,264 -18,142
Corporate and elimination (41,901 ) (25,252 ) +16,649
Consolidated total ¥ 811,505 ¥ 810,012 ¥ -1,493

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

The 2018 sales and operating revenue and operating income (loss) above has been reclassified to reflect the change in the business segment classification discussed on page F-13.

F-6

(Sales to Customers by Product Category)

The following table is a breakdown of sales and operating revenue to external customers for each segment. Sony management views each segment as a single operating segment.

(Millions of yen)
Three months ended December 31
Sales and operating revenue (to external customers) 2018 2019 Change
Game & Network Services
Digital Software and Add-on Content ¥ 353,905 ¥ 304,982 ¥ -48,923
Network Services 79,799 85,484 +5,685
Hardware and Others 325,405 226,110 -99,295
Total 759,109 616,576 -142,533
Music
Recorded Music 117,350 125,939 +8,589
Music Publishing 30,374 39,716 +9,342
Visual Media and Platform 57,563 48,206 -9,357
Total 205,287 213,861 +8,574
Pictures
Motion Pictures 140,319 101,345 -38,974
Television Productions 64,426 72,572 +8,146
Media Networks 71,595 61,785 -9,810
Total 276,340 235,702 -40,638
Electronics Products & Solutions
Televisions 264,258 235,859 -28,399
Audio and Video 123,481 121,742 -1,739
Still and Video Cameras 122,767 122,031 -736
Mobile Communications 134,978 113,500 -21,478
Other 63,835 52,686 -11,149
Total 709,319 645,818 -63,501
Imaging & Sensing Solutions 201,469 277,816 +76,347
Financial Services 161,630 405,382 +243,752
All Other 86,466 63,129 -23,337
Corporate 2,185 4,878 +2,693
Consolidated total ¥ 2,401,805 ¥ 2,463,162 ¥ +61,357

F-7

(Sales to Customers by Product Category)

(Millions of yen)
Nine months ended December 31
Sales and operating revenue (to external customers) 2018 2019 Change
Game & Network Services
Digital Software and Add-on Content ¥ 837,114 ¥ 747,835 ¥ -89,279
Network Services 231,240 253,467 +22,227
Hardware and Others 676,489 495,070 -181,419
Total 1,744,843 1,496,372 -248,471
Music
Recorded Music 322,552 350,103 +27,551
Music Publishing 71,274 117,413 +46,139
Visual Media and Platform 189,463 163,125 -26,338
Total 583,289 630,641 +47,352
Pictures
Motion Pictures 318,221 322,586 +4,365
Television Productions 178,323 180,604 +2,281
Media Networks 195,044 178,658 -16,386
Total 691,588 681,848 -9,740
Electronics Products & Solutions
Televisions 642,513 550,099 -92,414
Audio and Video 290,271 284,239 -6,032
Still and Video Cameras 339,057 321,891 -17,166
Mobile Communications 380,218 291,764 -88,454
Other 173,059 164,792 -8,267
Total 1,825,118 1,612,785 -212,333
Imaging & Sensing Solutions 601,066 774,570 +173,504
Financial Services 846,363 1,115,291 +268,928
All Other 238,139 181,704 -56,435
Corporate 7,783 17,934 +10,151
Consolidated total ¥ 6,538,189 ¥ 6,511,145 ¥ -27,044

Sony has realigned its product category configuration in regard to the segmentation change.  For further details, refer to Accounting Policies and Other Information in the Notes to Consolidated Financial Statements.  In connection with the realignment, all prior period sales amounts by product category in the table above have been reclassified to conform to the current presentation.

In the G&NS segment, Digital Software and Add-on Content includes distribution of software titles and add-on contents through network by Sony Interactive Entertainment; Network Services includes network services relating to game, video and music content; Hardware and Others includes home and portable game consoles, packaged software and peripheral devices.  In the Music segment, Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles, including game applications based on the animation titles, and various service offerings for music and visual products.  In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of motion pictures and direct-to-video content; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks worldwide.  In the EP&S segment, Televisions includes LCD and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones and memory-based portable audio devices; Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Mobile Communications includes smartphones and an internet-related service business; Other includes display products such as projectors and medical equipment.

Within the EP&S segment, the operating income (loss) of Mobile Communications for the three months ended December 31, 2018 and 2019 was (15,502) million yen and 6,965 million yen, respectively.  In addition, the operating income (loss) of the nine months ended December 31, 2018 and 2019 was (56,074) million yen and 8,639 million yen, respectively.

F-8

(Condensed Financial Services Financial Statements)

The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which is used by Sony to prepare its consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, then eliminated in the consolidated figures shown below.

(Condensed Balance Sheets)

(Millions of yen)
Financial Services Sony without<br><br> <br>Financial Services Consolidated
March 31 December 31 March 31 December 31 March 31 December 31
2019 2019 2019 2019 2019 2019
ASSETS
Current assets:
Cash and cash equivalents ¥ 509,595 ¥ 547,429 ¥ 960,478 ¥ 861,447 ¥ 1,470,073 ¥ 1,408,876
Marketable securities 1,324,538 1,567,158 — — 1,324,538 1,567,158
Notes and accounts receivable, trade and contract assets 16,479 11,321 1,055,669 1,315,948 1,065,802 1,320,863
Inventories — — 653,278 607,377 653,278 607,377
Other receivables 63,921 65,767 159,758 117,654 223,620 183,359
Prepaid expenses and other current assets 133,214 160,841 376,778 371,645 509,301 531,784
Total current assets 2,047,747 2,352,516 3,205,961 3,274,071 5,246,612 5,619,417
Film costs — — 409,005 487,449 409,005 487,449
Investments and advances 11,400,938 12,182,017 399,696 372,225 11,724,651 12,478,952
Investments in Financial Services, at cost — — 153,968 153,968 — —
Property, plant and equipment 22,920 16,104 752,847 837,541 777,053 854,931
Other assets:
Right-of-use assets — 57,047 — 286,271 — 342,789
Intangibles, net 42,968 44,944 874,998 878,236 917,966 923,180
Goodwill 7,225 7,225 761,327 785,448 768,552 792,673
Deferred insurance acquisition costs 595,265 618,792 — — 595,265 618,792
Deferred income taxes 3,533 2,994 198,953 191,341 202,486 194,187
Other 32,085 30,581 311,653 298,655 339,996 325,176
681,076 761,583 2,146,931 2,439,951 2,824,265 3,196,797
Total assets ¥ 14,152,681 ¥ 15,312,220 ¥ 7,068,408 ¥ 7,565,205 ¥ 20,981,586 ¥ 22,637,546
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings ¥ 564,609 ¥ 837,842 ¥ 226,470 ¥ 91,624 ¥ 791,079 ¥ 929,466
Short-term operating lease liabilities — 9,041 — 58,336 — 67,186
Notes and accounts payable, trade — — 492,124 464,265 492,124 464,265
Accounts payable, other and accrued expenses 40,228 29,274 1,653,895 1,643,140 1,693,048 1,671,762
Accrued income and other taxes 19,655 19,184 115,571 163,321 135,226 182,505
Deposits from customers in the banking business 2,302,314 2,432,044 — — 2,302,314 2,432,044
Other 197,123 196,059 474,926 466,667 666,024 656,193
Total current liabilities 3,123,929 3,523,444 2,962,986 2,887,353 6,079,815 6,403,421
Long-term debt 235,761 238,828 336,349 396,936 568,372 631,705
Long-term operating lease liabilities — 40,900 — 225,030 — 265,606
Accrued pension and severance costs 33,979 34,744 350,253 266,954 384,232 301,698
Deferred income taxes 355,356 375,172 176,065 185,280 531,421 545,623
Future insurance policy benefits and other 5,642,671 6,007,246 — — 5,642,671 6,007,246
Policyholders’ account in the life insurance business 3,048,202 3,323,874 — — 3,048,202 3,323,874
Other 15,488 14,535 288,164 270,139 281,382 263,098
Total liabilities 12,455,386 13,558,743 4,113,817 4,231,692 16,536,095 17,742,271
Redeemable noncontrolling interest — — 8,801 8,689 8,801 8,689
Equity:
Stockholders’ equity of Financial Services 1,695,563 1,751,476 — — — —
Stockholders’ equity of Sony without Financial Services — — 2,850,380 3,289,799 — —
Sony Corporation’s stockholders’ equity — — — — 3,746,377 4,231,604
Noncontrolling interests 1,732 2,001 95,410 35,025 690,313 654,982
Total equity 1,697,295 1,753,477 2,945,790 3,324,824 4,436,690 4,886,586
Total liabilities and equity ¥ 14,152,681 ¥ 15,312,220 ¥ 7,068,408 ¥ 7,565,205 ¥ 20,981,586 ¥ 22,637,546

F-9

Condensed Statements of Income

(Millions of yen)
Three months ended December 31
Financial Services Sony without<br><br> <br>Financial Services Consolidated
2018 2019 2018 2019 2018 2019
Financial services revenue ¥ 163,586 ¥ 407,228 ¥ — ¥ — ¥ 161,630 ¥ 405,382
Net sales and operating revenue — — 2,241,980 2,058,759 2,240,175 2,057,780
163,586 407,228 2,241,980 2,058,759 2,401,805 2,463,162
Cost of sales — — 1,584,529 1,413,592 1,581,376 1,411,228
Selling, general and administrative — — 428,677 398,647 430,025 400,032
Financial services expenses 125,712 374,384 — — 123,756 372,540
Other operating (income) expense, net 12 (2 ) (112,821 ) (18,054 ) (112,809 ) (18,056 )
125,724 374,382 1,900,385 1,794,185 2,022,348 2,165,744
Equity in net income (loss) of affiliated companies 32 (212 ) (2,501 ) 2,926 (2,469 ) 2,714
Operating income 37,894 32,634 339,094 267,500 376,988 300,132
Other income (expenses), net (19 ) 76 (36,439 ) 10,110 (36,458 ) 10,189
Income before income taxes 37,875 32,710 302,655 277,610 340,530 310,321
Income taxes 10,576 9,499 (111,298 ) 60,477 (100,723 ) 69,977
Net income 27,299 23,211 413,953 217,133 441,253 240,344
Less - Net income attributable to noncontrolling interests 71 86 2,707 2,645 12,291 10,806
Net income of Financial Services ¥ 27,228 ¥ 23,125 ¥ — ¥ — ¥ — ¥ —
Net income of Sony without Financial Services ¥ — ¥ — ¥ 411,246 ¥ 214,488 ¥ — ¥ —
Net income attributable to Sony Corporation's stockholders ¥ — ¥ — ¥ — ¥ — ¥ 428,962 ¥ 229,538
Nine months ended December 31
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Financial Services Sony without<br><br> <br>Financial Services Consolidated
2018 2019 2018 2019 2018 2019
Financial services revenue ¥ 852,244 ¥ 1,121,344 ¥ — ¥ — ¥ 846,363 ¥ 1,115,291
Net sales and operating revenue — — 5,697,566 5,400,223 5,691,826 5,395,854
852,244 1,121,344 5,697,566 5,400,223 6,538,189 6,511,145
Cost of sales — — 3,925,802 3,637,560 3,916,607 3,629,246
Selling, general and administrative — — 1,173,459 1,101,184 1,176,915 1,105,115
Financial services expenses 734,128 1,003,263 — — 728,246 997,211
Other operating (income) expense, net 51 42 (99,802 ) (24,073 ) (99,751 ) (24,017 )
734,179 1,003,305 4,999,459 4,714,671 5,722,017 5,707,555
Equity in net income (loss) of affiliated companies (430 ) (521 ) (4,237 ) 6,943 (4,667 ) 6,422
Operating income 117,635 117,518 693,870 692,495 811,505 810,012
Other income (expenses), net (55 ) (15 ) 104,007 11,125 87,509 (6,579 )
Income before income taxes 117,580 117,503 797,877 703,620 899,014 803,433
Income taxes 32,506 34,234 1,262 162,681 33,767 196,916
Net income 85,074 83,269 796,615 540,939 865,247 606,517
Less - Net income attributable to noncontrolling interests 184 259 6,396 7,717 36,837 36,970
Net income of Financial Services ¥ 84,890 ¥ 83,010 ¥ — ¥ — ¥ — ¥ —
Net income of Sony without Financial Services ¥ — ¥ — ¥ 790,219 ¥ 533,222 ¥ — ¥ —
Net income attributable to Sony Corporation's stockholders ¥ — ¥ — ¥ — ¥ — ¥ 828,410 ¥ 569,547

F-10

Condensed Statements of Cash Flows

(Millions of yen)
Nine months ended December 31
Financial Services Sony without<br><br> <br>Financial Services Consolidated
2018 2019 2018 2019 2018 2019
Cash flows from operating activities:
Net income  (loss) ¥ 85,074 ¥ 83,269 ¥ 796,615 ¥ 540,939 ¥ 865,247 ¥ 606,517
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization<br><br> <br>of deferred insurance acquisition costs and contract costs 68,611 60,154 209,794 221,239 278,405 281,393
Amortization of film costs — — 232,138 212,684 232,138 212,684
Other operating (income) expense, net 51 42 (99,802 ) (24,073 ) (99,751 ) (24,017 )
(Gain) loss on marketable securities and<br><br> <br>securities investments, net 43,780 (127,002 ) (80,130 ) (392 ) (36,350 ) (127,394 )
Changes in assets and liabilities:
(Increase) decrease in notes, accounts receivable,<br><br> <br>trade and contract assets (855 ) 5,158 (287,995 ) (242,695 ) (290,046 ) (237,477 )
(Increase) decrease in inventories — — 7,252 34,865 7,252 34,865
(Increase) decrease in film costs — — (296,276 ) (296,377 ) (296,276 ) (296,377 )
Increase (decrease) in notes and accounts<br><br> <br>payable, trade — — 124,026 (12,640 ) 124,026 (12,640 )
Increase (decrease) in future insurance policy<br><br> <br>benefits and other 290,626 554,596 — — 290,626 554,596
(Increase) decrease in deferred insurance<br><br> <br>acquisition costs (68,092 ) (73,385 ) — — (68,092 ) (73,385 )
(Increase) decrease in marketable securities held<br><br> <br>in the life insurance business (68,579 ) (103,746 ) — — (68,579 ) (103,746 )
Other (37,890 ) (41,646 ) (603 ) 60,410 (37,236 ) 19,048
Net cash provided by (used in) operating activities 312,726 357,440 605,019 493,960 901,364 834,067
Cash flows from investing activities:
Payments for purchases of fixed assets (13,849 ) (14,425 ) (216,169 ) (300,366 ) (230,008 ) (314,791 )
Payments for investments and advances (808,017 ) (970,438 ) (40,930 ) (40,423 ) (848,947 ) (1,010,861 )
Proceeds from sales or return of investments and<br><br> <br>collections of advances 216,013 208,164 85,172 93,526 301,185 301,690
Other 246 125 (257,479 ) (2,229 ) (257,231 ) (2,120 )
Net cash provided by (used in) investing activities (605,607 ) (776,574 ) (429,406 ) (249,492 ) (1,035,001 ) (1,026,082 )
Cash flows from financing activities:
Increase (decrease) in borrowings, net 189,714 272,960 (316,339 ) (73,866 ) (126,622 ) 198,773
Increase (decrease) in deposits from customers, net 205,990 211,135 — — 205,990 211,135
Dividends paid (26,100 ) (27,189 ) (38,081 ) (49,621 ) (38,081 ) (49,621 )
Other 113 62 (55,840 ) (205,734 ) (65,461 ) (215,191 )
Net cash provided by (used in) financing activities 369,717 456,968 (410,260 ) (329,221 ) (24,174 ) 145,096
Effect of exchange rate changes on cash and cash<br><br> <br>equivalents — — 49,499 (14,887 ) 49,499 (14,887 )
Net increase (decrease) in cash and cash equivalents,<br><br> <br>including restricted 76,836 37,834 (185,148 ) (99,640 ) (108,312 ) (61,806 )
Cash and cash equivalents, including restricted,<br><br> <br>at beginning of the fiscal year 393,133 509,595 1,199,805 964,218 1,592,938 1,473,813
Cash and cash equivalents, including restricted,<br><br> <br>at end of the period 469,969 547,429 1,014,657 864,578 1,484,626 1,412,007
Less - restricted cash and cash equivalents,<br><br> <br>included in other current assets and other assets — — 3,810 3,131 3,810 3,131
Cash and cash equivalents at end of the period ¥ 469,969 ¥ 547,429 ¥ 1,010,847 ¥ 861,447 ¥ 1,480,816 ¥ 1,408,876

F-11

Going Concern Assumption

Not Applicable

Significant Changes in Shareholders' Equity

Based on the resolution of the Board of Directors at the meeting held on May 16, 2019, Sony Corporation repurchased 26,058,100 shares of its common stock for 156,030 million yen during the nine months ended December 31, 2019.  The balance of treasury stock was 260,889 million yen, at cost, as of December 31, 2019 primarily due to the above-mentioned repurchase of common stock.

Accounting Policies and Other Information

(Recently adopted accounting pronouncements)

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which amends current leasing guidance.  The ASU requires substantially all leases to be recognized on the balance sheet.Sony has applied this ASU as of April 1, 2019, on a modified retrospective basis with no restatement of comparative periods. Sony has applied the package of practical expedients for leases that expired or existed prior to the adoption date.  As a result, Sony did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or whether initial direct costs for any existing leases qualify for capitalization.  In addition, Sony has applied the short-term lease exception.

As a result of the adoption of this ASU, Sony recognized 316,923 million yen of operating lease right-of-use assets and 341,251 million yen of lease liabilities for operating leases on the consolidated balance sheets at April 1, 2019.  This impact is mainly due to operating leases of real estate.  The difference of 24,328 million yen between right-of-use assets and lease liabilities represents deferred rent for leases that existed as of the date of adoption, which was offset against the opening balance of operating lease right-of-use assets.  Finance lease right-of-use assets which are included in property, plant and equipment in the consolidated balance sheets for the fiscal year ended March 31, 2019, are now presented as finance lease right-of-use assets from April 1, 2019 onward.

Targeted improvements to accounting for hedging activities

In August 2017, the FASB issued ASU 2017-12, which made targeted improvements to the accounting for hedging activities.   The amendments in this update simplify certain aspects of hedge accounting for both non-financial and financial risks and better align the recognition and measurement of hedge results with an entity’s risk management activities.  This ASU also amends certain presentation and disclosure requirements for hedging activities and changes how an entity assesses hedge effectiveness.  This ASU was effective for Sony as of April 1, 2019.  The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

(Number of Consolidated Subsidiaries and Affiliated Companies)

As of December 31, 2019, Sony had 1,518 consolidated subsidiaries (including variable interest entities) and 139 affiliated companies accounted for under the equity method.

(Weighted-average Number of Outstanding Shares Used for the Computation of EPS of Common Stock)

(Thousands of shares)
Three months ended December 31
Net income attributable to Sony Corporation’s stockholders 2018 2019
— Basic 1,269,243 1,227,355
— Diluted 1,296,840 1,255,030

F-12

(Thousands of shares)
Nine months ended December 31
Net income attributable to Sony Corporation’s stockholders 2018 2019
— Basic 1,268,455 1,237,842
— Diluted 1,296,639 1,265,421

The dilutive effect in the weighted-average number of outstanding shares for the three and nine months ended December 31, 2018 and 2019 primarily resulted from convertible bonds which were issued in July 2015.

(Segmentation)

Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2020 to reflect modifications to the organizational structure of certain segments and a change in the Senior Executives in charge of certain segments as of April 1, 2019.  In connection with this decision, the former Home Entertainment & Sound, Imaging Products & Solutions and Mobile Communications segments have been realigned as the Electronics Products & Solutions (“EP&S”) segment.  In connection with this realignment, the sales and operating revenue and operating income (loss) of each segment for the fiscal year ended March 31, 2019 have been reclassified to conform to the presentation for the fiscal year ending March 31, 2020.  In addition, the former Semiconductors segment has been renamed the Imaging & Sensing Solutions (“I&SS”) segment effective from the first quarter of the fiscal year ending March 31, 2020.

The G&NS segment includes network services businesses, the manufacture and sales of home gaming products and production and sales of software.  The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses.  The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses.  The EP&S segment includes the Televisions business, the Audio and Video business, the Still and Video Cameras business, the　smartphone business and Internet-related service business.  The I&SS segment includes the image sensors business.  The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market and a bank business in Japan.  All Other consists of various operating activities, including the disc manufacturing and recording media businesses.  Sony’s products and services are generally unique to a single operating segment.

(Accounting Methods Used Specifically for Interim Consolidated Financial Statements)

Income Taxes -

Sony estimates the annual effective tax rate (“ETR”) derived from a projected annual net income before taxes and calculates the interim period income tax provision based on the year-to-date income tax provision computed by applying the ETR to the year-to-date net income before taxes at the end of each interim period.  The income tax provision based on the ETR reflects anticipated income tax credits and net operating loss carryforwards; however, it excludes the income tax provision related to significant unusual or infrequent items.  Such income tax provision is separately reported from the provision based on the ETR in the interim period in which it occurs.

(Reclassifications)

Certain reclassifications of the financial statements and accompanying footnotes for the three and nine months ended December 31, 2018 have been made to conform to the presentation for the three and nine months ended December 31, 2019.

(Pension Plan Amendment)

From October 1, 2019, Sony Corporation and substantially all of its subsidiaries in Japan have amended their defined benefit pension plans and have implemented defined contribution plans for all employees other than those employees that had retired before the amendments.  As a result, accrued pension and severance costs decreased 74,872 million yen and accumulated other comprehensive income increased 81,230 million yen in the consolidated balance sheets as of December 31, 2019.  In addition, a loss on the pension plan amendment of 6,358 million yen was recorded in other expenses in the consolidated statements of income for the three and nine months ended December 31, 2019.

F-13

(Listing of SRE Holdings Corporation)

On December 19, 2019, SRE Holdings Corporation (“SRE”), Sony Corporation’s consolidated subsidiary, became a publicly listed company on the Tokyo Stock Exchange Mothers market (the “Listing”).  Upon the Listing, Sony sold a portion of its shares of SRE, and shares issued by SRE were publicly offered (collectively, the “Sale”).  Sony’s ownership of SRE’s total shares, which was 56.3% before the Sale, has decreased to 44.5% after the Sale.  As a result, SRE has become an affiliate accounted for under the equity method of Sony Corporation.  In connection with the Sale, Sony recorded a gain of 17,266 million yen, which consisted of both a remeasurement gain based on fair value for the shares Sony continues to hold after the Sale, and a realized gain for the sold shares, in other operating (income) loss, net in the consolidated statements of income for the three and nine months ended December 31, 2019.

(Subsequent event)

On January 29, 2020, Sony Life Insurance Co., Ltd. (“Sony Life”), Sony’s consolidated subsidiary, acquired 50% of the shares of AEGON Sony Life Insurance Co., Ltd. and SA Reinsurance Ltd. (collectively, the “JVs”) from AEGON International B.V.  The purchase price for the acquisition was 18,750 million yen.  As a result of this acquisition, Sony Life owns 100% of the shares of the JVs and the JVs have become consolidated subsidiaries of Sony.

F-14

Outlook for the Fiscal Year Ending March 31, 2020

The forecast for consolidated results for the fiscal year ending March 31, 2020, as announced on October 30, 2019, has been revised as follows:

(Billions of yen)
March 31, 2019<br><br> <br>Results October<br><br> <br>Forecast February<br><br> <br>Forecast Change from<br><br> <br>October Forecast
Sales and operating revenue ¥ 8,665.7 ¥ 8,400 ¥ 8,500 +¥100 billion +1.2 %
Operating income 894.2 840 880 +¥40 billion +4.8 %
Income before income taxes 1,011.6 800 860 +¥60 billion +7.5 %
Net income attributable to Sony Corporation’s stockholders 916.3 540 590 +¥50 billion +9.3 %

Assumed foreign exchange rates are the following:

Assumed foreign exchange rates for the three months ending March 31, 2020 (For your reference)
Assumed foreign exchange rates for the six months ending<br><br> <br>March 31, 2020 at the time of the October forecast
1 U.S. dollar approximately 109 yen approximately 108 yen
1 Euro approximately 121 yen approximately 118 yen

Consolidated sales and operating revenue (“sales”) for the fiscal year ending March 31, 2020 are expected to be higher than the October forecast due to higher-than-expected sales primarily in the Financial Services and Imaging & Sensing Solutions (“I&SS”) segments, partially offset by lower-than-expected sales in the Game & Network Services (“G&NS”) and Electronics Products & Solutions (“EP&S”) segments.

Consolidated operating income is expected to be higher than the October forecast due to an expected increase in operating income primarily in the I&SS segment, as well as an expected decrease in operating loss in All Other, Corporate and elimination mainly due to the impact of remeasurement and realized gains recorded in the current quarter as a result of the public listing and sale of a portion of shares of SRE Holdings Corporation.  These positive factors are expected to be partially offset by decreases in operating income in the Financial Services and G&NS segments.

Restructuring charges for the Sony Group are expected to increase by 2 billion yen compared to the October forecast to approximately 26.0 billion yen, compared to 33.1 billion yen in the fiscal year ended March 31, 2019.  Restructuring charges are recorded as an operating expense and are included in the forecast for operating income.

Income before income taxes is expected to be 860 billion yen, higher than the October forecast, primarily due to the above-mentioned expected increase in operating income, as well as an expected improvement in other income and expenses, net.

Net income attributable to Sony Corporation’s stockholders is expected to be higher than the October forecast mainly due to the above-mentioned expected increase in income before income taxes.

As of March 31, 2019, Sony has an approximately 350 billion yen valuation allowance recorded against its Japan national net deferred tax assets that are attributable to Sony Corporation and its national tax filing group in Japan.  Because Sony’s Japan businesses continue to show improved profitability, it is reasonably possible that more than 50% of this valuation allowance could be reversed in the near future.  The potential reduction in income taxes that may result from such reversal has not been included in the February forecast as Sony continues to monitor the realizability of these assets.

1

The forecast for each business segment for the fiscal year ending March 31, 2020 has been revised as follows:

(Billions of yen)
March 31, 2019<br><br> <br>Results October<br><br> <br>Forecast February<br><br> <br>Forecast
Game & Network Services (G&NS)
Sales and operating revenue ¥ 2,310.9 ¥ 2,000 ¥ 1,950
Operating income 311.1 240 235
Music
Sales and operating revenue 807.5 850 850
Operating income 232.5 140 140
Pictures
Sales and operating revenue 986.9 1,030 1,030
Operating income 54.6 70 70
Electronics Products & Solutions (EP&S) *
Sales and operating revenue 2,320.6 2,110 2,070
Operating income 76.5 111 111
Imaging & Sensing Solutions (I&SS) **
Sales and operating revenue 879.3 1,040 1,090
Operating income 143.9 200 230
Financial Services
Financial services revenue 1,282.5 1,330 1,460
Operating income 161.5 170 160
All Other, Corporate and elimination
Operating loss (85.8 ) (91 ) (66 )
Consolidated
Sales and operating revenue 8,665.7 8,400 8,500
Operating income 894.2 840 880

* Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2020 to reflect modifications to the organizational structure of certain segments and a change in the Senior Executives in charge of certain segments as of April 1, 2019.  In connection with this decision, the former Home Entertainment & Sound, Imaging Products & Solutions and Mobile Communications segments have been realigned as the Electronics Products & Solutions (EP&S) segment.  The sales and operating income (loss) of each segment for the fiscal year ended March 31, 2019 have been reclassified to conform to the presentation for the fiscal year ending March 31, 2020.

** The former Semiconductors segment has been renamed the Imaging & Sensing Solutions (I&SS) segment effective from the first quarter of the fiscal year ending March 31, 2020.

Game & Network Services (G&NS)

Sales are expected to be lower than the October forecast primarily due to lower-than-expected software sales of non-first-party titles.  Operating income is expected to be lower than the October forecast primarily due to the impact of the above-mentioned expected decrease in software sales of non-first-party titles, partially offset by expected cost reductions.

Electronics Products & Solutions (EP&S)

Sales are expected to be lower than the October forecast due to lower-than-expected sales of televisions, digital cameras and broadcast- and professional-use products, reflecting a downturn in the market.  Operating income is expected to remain unchanged from the October forecast due to further reductions in operating costs, substantially offset by the impact of the above-mentioned decrease in sales.

Imaging & Sensing Solutions (I&SS)

Sales are expected to be higher than the October forecast due to higher-than-expected sales of image sensors for mobile products, resulting from an improvement in product mix and higher-than-expected unit sales.  Operating income is expected to be higher than the October forecast primarily due to the impact of the above-mentioned expected increase in sales.

2

      Financial Services

Financial Services revenue is expected to be higher than the October forecast primarily due to an improvement in investment performance in the separate accounts at Sony Life Insurance Co. Ltd. (“Sony Life”).  Operating income is expected to be lower than the October forecast primarily due to an overall deterioration in the provision of policy reserves for minimum guarantees for variable life insurance, resulting from market fluctuations and other factors, and net gains and losses on derivative transactions to hedge market risks for products at Sony Life.  Operating income is also expected to be negatively impacted by a deterioration in profit and loss due to a lower-than-expected increase in the policy amount in force at Sony Life.

The effects of future gains and losses on investments held by the Financial Services segment due to market fluctuations have not been incorporated within the above forecast as it is difficult for Sony to predict market trends in the future.  Accordingly, future market fluctuations could further impact the current forecast.

The forecasts for sales and operating income for the Music and Pictures segments remain unchanged from the October forecast.

The above forecast is based on management’s current expectations and is subject to uncertainties and changes in circumstances.  Actual results may differ materially from those included in this forecast due to a variety of factors.  See “Cautionary Statement” below.

Notes about Financial Performance of the Music, Pictures and Financial Services segments

On November 14, 2018, Sony acquired the entirety of the approximately 60% equity interest held by the investor consortium led by Mubadala Investment Company in DH Publishing, L.P. (“EMI”), which owned and managed EMI Music Publishing, resulting in EMI becoming a wholly-owned subsidiary of Sony.  Financial results of EMI included in the Music segment for the fiscal year ended March 31, 2019 include equity earnings (loss) from April 1 through November 13, 2018 and sales and operating income (loss) from November 14, 2018 through March 31, 2019.  Sales and operating income (loss) for the Music segment in the fiscal year ending March 31, 2020 include the financial results of EMI from April 1, 2019 onward.

The Music segment results include the yen-translated results of Sony Music Entertainment, Sony/ATV Music Publishing and EMI, all U.S.-based operations which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis, and the results of Sony Music Entertainment (Japan) Inc., a Japan-based music company which aggregates its results in yen.

The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment Inc., a U.S.-based operation that aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.

The Financial Services segment results include Sony Financial Holdings Inc. (“SFH”) and SFH’s consolidated subsidiaries such as Sony Life, Sony Assurance Inc. and Sony Bank Inc.  The results discussed in the Financial Services segment differ from the results that SFH discloses separately on a Japanese statutory basis.

3

Cautionary Statement

Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:

(i) Sony’s ability to maintain product quality and customer satisfaction with its products and services;
(ii) Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including image sensors, game and network platforms, smartphones and televisions,<br> which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing customer preferences;
(iii) Sony’s ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms;
(iv) the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic initiatives;
(v) changes in laws, regulations and government policies in the markets in which Sony and its third-party suppliers, service providers and business partners operate, including those related to taxation, as well as growing consumer<br> focus on corporate social responsibility;
(vi) Sony’s continued ability to identify the products, services and market trends with significant growth potential, to devote sufficient resources to research and development, to prioritize investments and capital expenditures<br> correctly and to recoup its investments and capital expenditures, including those required for technology development and product capacity;
(vii) Sony’s reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, marketing and distribution of its products, and its<br> other business operations;
(viii) the global economic and political environment in which Sony operates and the economic and political conditions in Sony’s markets, particularly levels of consumer spending;
(ix) Sony’s ability to meet operational and liquidity needs as a result of significant volatility and disruption in the global financial markets or a ratings downgrade;
(x) Sony’s ability to forecast demands, manage timely procurement and control inventories;
(xi) foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets, liabilities and operating results<br> are denominated;
(xii) Sony’s ability to recruit, retain and maintain productive relations with highly skilled personnel;
(xiii) Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or renew licenses relating to intellectual property rights and to defend itself against claims that its products or services infringe<br> the intellectual property rights owned by others;
(xiv) the impact of changes in interest rates and unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment;
(xv) shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;
(xvi) risks related to catastrophic disasters or similar events;
(xvii) the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information and the personally identifiable<br> information of its employees and customers, potential business disruptions or financial losses; and
(xviii) the outcome of pending and/or future legal and/or regulatory proceedings.

Risks and uncertainties also include the impact of any future events with material adverse impact. Important information regarding risks and uncertainties is also set forth in Sony’s most recent Form 20-F, which is on file with the U.S. Securities and Exchange Commission.

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